13 November 2013 News

State regulators unaffected by NRRA

The implementation of Part II of the Nonadmitted and Reinsurance Reform Act (NRRA) in 2010 has had no adverse impact on the ability of state regulators to access reinsurance information for regulated entities in their jurisdictions.

That was the conclusion of a report submitted by the Federal Insurance Office (FIO) to Congress regarding the NRRA’s impact on the ability of state regulators to access reinsurance information for regulated entities in their jurisdictions. Under the Dodd-Frank Act, the FIO was required to report to Congress on this matter.

Before the NRRA was enacted, a few states exerted regulatory authority over the financial condition and reporting of reinsurers that were not domiciled in their state. Regulators in a few states attempted to deny financial statement credit for ceding insurers that were not domiciled in their state, and restricted the terms and conditions of reinsurance contracts for such ceding insurers.

The NRRA prohibits the extraterritorial application of such laws and requirements. Under the NRRA, only the domestic regulator of a reinsurer is responsible for regulating the financial solvency of the reinsurer. A non-domiciliary state may not demand any financial information from foreign reinsurers other than what is provided to the domestic regulator. The NRRA makes it clear that only the domiciliary state of a ceding insurer may deny credit for reinsurance.

The FIO concluded that the NRRA has not had an adverse impact on the ability of state regulators to access reinsurance information for regulated companies. In preparing the report, the FIO consulted with the Reinsurance Association of America (RAA) and the National Association of Insurance Commissioners (NAIC).

The report declares that state regulators did not express any concern about the impact of Part II of the NRRA and the ability to promptly receive needed financial information about a reinsurer from other regulators; although a few regulators speculated that in some cases information may not be made available in the future, no “currently known factual bases” were provided to the FIO with respect to this concern; and the RAA indicated that its members are not aware of any situation in which a state regulator has been unable to obtain information.

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